Best Places To Invest Your Money In Crypto

Investing in cryptocurrency is a divisive topic. Crypto is a risky but potentially rewarding opportunity for investors to add to their portfolio. Cryptoassets are digital assets stored on a blockchain, and they are decentralised, meaning they are controlled by a network of users rather than a single point of authority.

There are several ways to invest in cryptocurrency. You can buy crypto directly using a crypto exchange or through certain broker-dealers. You can also invest in crypto funds and companies, or crypto-focused exchange-traded funds (ETFs).

Some of the most popular cryptocurrencies include Bitcoin, Ethereum, Tether, Binance Coin, Solana, Dogecoin, and Cardano.

Crypto exchanges

Centralized crypto exchanges (CEX) are managed by a single organization, allowing users to convert fiat currency, such as dollars, directly into crypto. They are easy to use, especially for beginners, but go against the decentralized nature of cryptocurrency and may require users to follow Know Your Customer (KYC) rules. Examples of CEX include Coinbase, Gemini, and Kraken.

Decentralized crypto exchanges (DEX) distribute responsibility for facilitating and verifying crypto trades to anyone willing to join a network and certify transactions, similar to cryptocurrency blockchains. DEX may offer increased accountability and transparency, and they can continue operating even if something happens to the company that created the exchange. However, they are often less user-friendly and may not support direct fiat-to-crypto conversions.

When choosing a crypto exchange, it is important to consider factors such as security, educational resources, the availability of desired cryptocurrencies, trading volume, fees, and customer support. Here are some popular crypto exchanges:

• Binance: One of the largest crypto exchanges by trading volume, offering a wide range of cryptocurrencies and features.
• Coinbase: User-friendly interface, strong security, and a large selection of tradable cryptocurrencies.
• Kraken: One of the oldest U.S. crypto exchanges with competitive trading fees and advanced features like margin trading.
• Gemini: Available in all 50 U.S. states, Gemini offers a simple interface, a wide range of features, and extensive educational resources.
• Crypto.com: Provides over 250 tradable cryptocurrencies and unique perks for Crypto.com Visa Card users.
• KuCoin: Offers access to a wide library of altcoins at low fees, but it is not licensed in the U.S.
• EToro: A newcomer to the U.S. market, offering an engaging communal experience and the ability to copy advanced users' trading strategies.
• BYDFi: A Singapore-based exchange with low trading fees and a decent selection of popular cryptocurrencies.

Crypto wallets

Hot Wallets

Hot wallets are digital tools that are always connected to the internet. They are usually accessible through mobile devices, desktop computers, or web browsers. Hot wallets are more convenient and easier to recover if you lose your private key. However, they are less secure than cold wallets and are vulnerable to various types of cyberattacks. Examples of hot wallets include:

• Coinbase Wallet
• MetaMask
• TrustWallet
• Electrum
• BlueWallet
• Exodus
• Crypto.com
• Zengo

Cold Wallets

Cold wallets store your digital keys offline, either on a hardware device or a physical medium like paper. Hardware wallets usually come in the form of a USB drive, while paper wallets may use print-out QR codes, written text, or engravings on materials such as metal. Cold wallets are more secure and harder for malicious users to access. However, they are limited in function and are at risk of being lost or destroyed. Examples of cold wallets include:

• KeepKey
• Ledger Nano S Plus
• SafePal

Choosing a Crypto Wallet

When choosing a crypto wallet, it is important to consider your trading frequency, the types of crypto you want to trade, your budget, and the functionality you need. Here are some general suggestions:

• Supported currencies: Look for wallets that support a wide range of cryptocurrencies, including popular altcoins such as Ethereum, Cardano, and Solana.
• Accessible interface: Opt for wallets with a user-friendly and intuitive interface.
• 24/7 customer support: Prefer wallets that offer round-the-clock customer support.
• Hardware wallet compatibility: Choose a wallet that is compatible with hardware wallets to facilitate trading and add an extra layer of security.

Crypto futures

The first Bitcoin futures contracts were listed on the CBOE in December 2017 but have since been discontinued. In January 2024, the exchange announced that margined Bitcoin and Ether futures began trading. The CME introduced Bitcoin futures contracts in December 2017, and these are traded on the Globex electronic trading platform and settled in cash.

There are several benefits to trading cryptocurrency futures. Firstly, they offer regulated exposure to cryptocurrencies, which is significant given the volatility of the ecosystem. Secondly, they simplify the process of investing in Bitcoin, as investors do not need to create a Bitcoin wallet or put money into custody solutions for storage and security. Thirdly, they are safer than owning crypto, as futures contracts have positions and price limits that enable investors to curtail their risk exposure.

There are several popular exchanges for cryptocurrency futures, including Binance, Deepcoin, ByBit, OKX, and Bitget.

It is important to note that cryptocurrency investing is risky, and investors should not invest more money than they can afford to lose.

Crypto ETFs

The first cryptocurrency ETF, the ProShares Bitcoin Strategy ETF, started trading in October 2021. Since then, several other crypto ETFs have emerged, providing investors with a range of options to gain exposure to the cryptocurrency market.

Some crypto ETFs invest directly in cryptocurrencies, while others invest in crypto-focused companies or derivative securities such as futures contracts. For example, the Fidelity® Crypto Industry and Digital Payments ETF (FDIG) invests in companies that help power crypto and digital payments, while the Schwab Crypto Thematic ETF provides exposure to companies that may benefit from the development and utilisation of cryptocurrencies and blockchain technology.

As with any investment, it is crucial to carefully research and understand the risks involved before investing in crypto ETFs. Cryptocurrencies are highly volatile and unregulated, making them a risky investment.

Crypto mining

Miners are incentivised to assist in the primary purpose of mining: to earn the right to record transactions on the blockchain for the network to verify and confirm. This is crucial for the security of the blockchain, which allows cryptocurrencies to function as a peer-to-peer decentralised network without any need for oversight from a third party.

In the early days of Bitcoin, anyone with a decent home computer could participate in mining. But as the blockchain has grown, the computational power required to maintain it has increased. As a result, amateur bitcoin mining hasn't typically been profitable for hobbyists in years. Virtually all mining is now done by specialised companies or groups of people who band their resources together.

To be able to mine with some chance of success, you'll need to invest in one of the top graphics processing units (GPUs) for your computer or an application-specific integrated circuit (ASIC). Capable GPUs can range in price from about $1,000 to $2,000; ASICs can cost much more, into the tens of thousands of dollars.

Mining pools are operated by third parties and coordinate groups of miners. By working together in a pool and sharing the payouts, miners have a better chance of being rewarded than they would working alone. Most pools use a payout system based on how much work you contribute.

Determining whether crypto mining is worthwhile depends on several factors, including the mining rig's hash rate, electric power consumption and overall costs. Crypto mining machines tend to consume a lot of electricity and emit significant heat, so your cooling bill will likely increase.

The taxation of crypto mining is an important consideration, as miners will generally face tax consequences when they are rewarded with cryptocurrency for their mining activities, and when they sell or exchange the reward tokens.

Frequently asked questions